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On Friday, JPMorgan analysts began coverage on Celestica (TSX:CLS) stock (NYSE:CLS), issuing an Overweight rating and setting a price target of $166.00. The analysts highlighted the company’s strong potential due to its involvement in artificial intelligence (AI) infrastructure, particularly through its custom ASIC servers and white box switches. The company’s stock has already demonstrated remarkable performance, with a 236% return over the past year. According to InvestingPro data, nine analysts have recently revised their earnings expectations upward for the upcoming period.
Celestica is poised to capitalize on the growing demand for AI infrastructure investments, according to JPMorgan. The firm’s solid relationships with major hyperscalers are expected to provide a significant advantage, especially in the markets for white box switching and custom ASIC servers. These areas are seen as key drivers for the future growth of the company. The company’s strong market position is reflected in its impressive 21.17% revenue growth over the last twelve months, with revenue reaching $9.65 billion.
The analysts also noted Celestica’s commitment to research and development (R&D), which stands at approximately 1% of its revenue. This figure is notably higher than the less than 0.5% spent by its peers. JPMorgan believes this investment supports a shift in revenue towards businesses with higher margins, particularly within the High Performance Solutions (HPS) portfolio.
The increased R&D spend is anticipated to contribute to a re-rating of Celestica’s shares. This reassessment is expected not only because of the company’s growth outlook but also due to the appreciation of higher quality margins and earnings in the medium term.
JPMorgan’s analysis suggests that Celestica’s strategic investments and focus on high-margin businesses will lead to a favorable re-evaluation of the company’s financial prospects. The Overweight rating and ambitious price target reflect the firm’s positive outlook on Celestica’s position in the AI infrastructure sector. InvestingPro analysis shows the company maintains a GREAT financial health score, with particularly strong momentum metrics. Discover more insights and 13 additional ProTips about Celestica in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Celestica has seen several developments that could interest investors. RBC Capital Markets recently raised its price target for Celestica to $160, citing strong business momentum and potential for earnings to surpass consensus estimates. This comes after a positive investor meeting with Celestica’s CFO, which reinforced confidence in the company’s strategic direction and its product offerings for hyperscaler clients. Stifel also raised its price target to $150, noting Celestica’s strong engineering capabilities and recent program wins, which are expected to significantly contribute to revenue from 2026 onwards.
Additionally, BMO Capital Markets increased its price target to $140, highlighting Celestica’s promising position in the artificial intelligence sector and its potential for increased capital expenditures. The company’s recent market share gains and strong positioning in AI have been factors in this positive outlook. In corporate governance news, Celestica announced the upcoming resignation of board member Laurette T. Koellner, effective January 31, 2025, due to personal reasons. The company assured that her departure is unrelated to any operational disagreements and is actively seeking a replacement in line with its Diversity Policy.
These recent developments reflect a period of strategic growth and change for Celestica, with analysts showing confidence in the company’s future prospects.
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